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Synopsis As Introduced Amends the Illinois Income Tax Act with respect to the earned income tax credit. Extends the 5% credit through taxable years beginning on or before December 31, 2004 (now, ends with taxable years ending on or before December 31, 2002). Increases the credit from 5% of the federal credit to 10% in 2005, 15% in 2006, and 20% in 2007 and thereafter. Beginning in 2005, requires the excess credit to be refunded to the taxpayer, but not counted in determining eligibility for means-tested benefits. Deletes the repeal of the credit. Exempts the credit from the sunset provisions of the Act. Effective immediately.
Fiscal Note (Department of Revenue)
In tax year 2001, the Earned Income Tax Credit cost the State of Illinois approximately $44 million in lost tax liability and in tax year 2002 it is expected to cost $45 million. Extending the credit through 2004 will increase the amount by just under $1 million each year. Beginning with tax year 2005, the bill begins to ramp up the percentage of the federal credit for Illinois Earned Income Tax Credit purposes from 5% of the federal credit to 10% of the federal credit. In addition, the bill requires that any excess credit be refunded to the taxpayer. In tax year 2005, the credit is expected to cost $135.6 million. In tax year 2006, the credit is increased to 15% of the federal credit, and the excess is refundable. This is estimated to cost $209.4 million. In 2007 and thereafter, the credit becomes 20% of the federal credit and is refundable. This will cost the State of Illinois approximately $284 million per year.
House Floor Amendment No. 1 Removes the language increasing the credit to more than 5% of the federal credit over a period of years. Requires any excess credit to be refunded to the taxpayer beginning with taxable year 2004 (2005 in underlying bill).
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